January 03, 2018
Austin Frakt and Aaron Carroll had an interesting Upshot piece in the NYT on why the U.S. spends twice as much per person as other wealthy countries for its health care. The piece cites research pointing out that people in the United States do not use more health care services than people in other countries. The reason that we pay more for health care is that actors in the industry, such as doctors, drug companies, insurers, and medical equipment manufacturers, get more money than their counterparts elsewhere.
The piece concludes by noting a couple of mechanisms for containing costs, but then argues:
“If attempted nationally, or even in a state, either of these would be met with resistance from all those who directly benefit from high prices, including physicians, hospitals, pharmaceutical companies — and pretty much every other provider of health care in the United States.
“Higher prices aren’t all bad for consumers. They probably lead to some increased innovation, which confers benefits to patients globally. Though it’s reasonable to push back on high health care prices, there may be a limit to how far we should.”
It’s striking to see economists reluctant to use mechanisms that would bring payments in the health care in line with payments in the rest of the world because they “would be met with resistance from all those who directly benefit from high prices.”
Efforts to reduce trade barriers that had the effect of destroying jobs and cutting pay for autoworkers, textile workers, and other manufacturing workers were also met with resistance. Economists not only supported these efforts, they treated them as an almost holy cause. They insisted on “free trade,” as the ultimate good.
For some reason, Frakt and Carroll believe that comparable efforts (we can also use trade in the health care sector to reduce costs) to reduce excess payments in the health care sector are a bad idea because the people who would see their pay and income reduced will be unhappy. In this context, it is probably worth mentioning that there is hugely more money at stake in bringing our health care costs in line with the rest of the world than with reducing trade barriers with items like steel and cars. The latter can save us at most a few tens of billions a year. If we paid the same amount per person for health care as people in Canada or Germany, the savings would be more than $1.5 trillion annually, more than $4,000 per person per year.
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